The importance of Dutch family businesses and the tax facilities for transfers under inheritance law or gifts

Abstract

The authors discuss the importance of family businesses for the Dutch economy and whether specific tax legislation should incentivise these enterprises or remove obstacles. There are about 300 thousand family businesses in the Netherlands which form a major part of the economy. About thirty percent of the Dutch labour force is employed in family businesses. Current Dutch tax law has no specific tax regime for family businesses. Nevertheless, there are regulations applicable to the transfer of a family business under inheritance law or gifts which are mainly used by family businesses. In this contribution, Dutch tax facilities that apply to a business transfer by gift or inheritance are considered and their pros and cons are discussed. Various Dutch studies show that the exemption in the gift and inheritance tax based on the going concern value is ineffective and that most firms do not need such a favourable treatment. This has fuelled the debate regarding the continuation and design of the facilities and have let to discrimination issues.